The derived demand for borrowed funds has the characteristic negative slope of any demand curve.

Question

Quizplus · Accepted Answer

The derived demand for borrowed funds has a negative slope because as the interest rate increases, the cost of borrowing increases, and therefore, the quantity demanded of borrowed funds decreases. This follows the basic law of demand that states as the price of a good or service goes up, the quantity demanded of that good or service goes down.

The Derived Demand for Borrowed Funds Has the Characteristic Negative